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Economist at UOB Group Barnabas Gan reviewed the latest inflation figures in Singapore for the month of September.

Key Quotes

“Singapore’s consumer prices fell marginally by 0.01% y/y (+0.3% m/m sa) in September 2020, marking its seventh straight month of deflation. Core prices also declined 0.1% y/y in the same month, albeit a smaller contraction versus August’s decline of 0.3% y/y.”

“Factors that contributed to lower consumer prices included low oil prices, lacklustre consumer demand and non-existent tourism spending.”

“On the flip side, higher food, communication and household durables & services prices cushioned the overall decline in domestic consumer prices. The rise in food prices however decelerated further to its slowest pace in 6 months likely on the back of improving global supply conditions.”

“Official outlook for both headline and core CPI in 2020 have been revised higher. Headline and core CPI are now expected to average between -0.5% and 0.0% in 2020, up from the previous range of between -1.0% and 0.0%. Some pick-up in consumer prices is expected in 2021 given the fading of disinflationary factors.”

“The inflation outlook for the rest of this year will likely be shaped by several factors. These include (1) the improving global supply conditions should continue to cap the increase in food price, as seen in the ongoing deceleration of food inflation, (2) low oil prices will likely persist into 2020/2021, which will help limit the cost of transportation, and (3) relatively weaker labour condition which could pressure domestic consumption demand.”

“While low consumer prices could still be seen for the rest of 2020, pockets of inflation from food, communications, and vehicle costs could effectively cushion the deflationary effects from other clusters. Nonetheless, low oil prices are likely here to stay amid an absent tourism-driven demand at least for the rest of 2020. As such, we keep our full-year headline and core inflation forecasts at -0.3% in 2020.”